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Tax Tussle Riling Legislature in Final Week

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Nearly 2,000 people went to Gov. Rick Perry's website in January to sound off on how lawmakers should cut taxes by $1.8 billion. Many won't get what they wanted.

The state sales tax rate isn't budging. Another sales tax holiday isn't in the works. Nor is the Texas Legislature raising homestead property exemptions by $10,000, which prevailed as most popular of nearly a dozen tax-cutting options the governor suggested in an online survey when this 140-day session started.

Not proposed on that "Tax Relief for Texans" poll: refunding $630 million collected to help poor families pay their electric bills.

Yet in a tumultuous final week at the Capitol, that idea is causing turmoil as lawmakers wrangle to settle both on a roughly $100 million budget and tax relief demanded by Perry in what might be his final session.

"I cannot sacrifice the interest of the poor in order to finance somebody else's tax breaks," Democratic state Rep. Sylvester Turner said Thursday.

The session ends Monday, but without a budget deal or $1.8 billion in tax breaks that Perry wants, lawmakers will likely cancel their plans to go home.

Turner's ire isn't merely futile liberal protest in the GOP-controlled Legislature. The refund is part of a complex Texas budget deal that has come down to the wire, and Republicans need Democrats' support to reach a two-thirds threshold to pass key components of the spending compromise.

Turner helped create the System Benefit Fund in 1999, which tacks on a per-megawatt fee of 65 cents on electric bills. More than $800 million has been collected over the last decade; the average customer winds up paying roughly $10 a year.

That money is intended to give low-income families a discount on electric bills during sweltering Texas summers, when air conditioners are cranked. But lawmakers have instead let those dollars sit on the books as a trick to balance the state budget, and the Senate now wants to give roughly $100 refunds to those who've paid in.

Lt. Gov. David Dewhurst and his Senate budget chief, Republican state Sen. Tommy Williams, call it a form of tax relief that gets lawmakers close to Perry's target.

Not all Republicans share that interpretation.

"We don't see that as a tax cut. That's a one-time fee rebate," said Chuck DeVore of the Texas Public Policy Foundation, a conservative think tank that is often ideologically aligned with Perry.

The House budget chief, Republican state Rep. Jim Pitts, cast doubt on the refund making it through his chamber.

"Sen. Williams has his way that he would like to do it, and that is give you a check," Pitts said. "The House's version is a lot different than that."

Pitts would not elaborate.

Perry has not announced whether he'll seek re-election next year. But he began this session -- his seventh in 13 years as governor -- by calling for tax relief in his State of the State address and launching an online survey.

"There are plenty of good ideas, and that promises to be a very valuable conversation for us to engage in," Perry said in his January address. "We want to hear more from the taxpayers themselves about how we run things in Austin."

The people spoke -- 1,954 of them, to be exact, according to poll results released by the governor's office.

None of the four options that would affect the average Texan are in line to pass this session. Those include two of the most popular options: increasing homestead tax exemptions by $10,000 annually and lowering the state sales tax rate to 6 percent.

Perry has been checking the political winds on this issue.

"The governor wanted to hear from the public and their input has been helpful during this process," said Perry spokesman Josh Havens. He added that Perry still expects significant tax cuts.

Suggested breaks for businesses are poised to fare better. Choices in the poll included making the small business tax permanent, a communications sales tax exemption for industries like cable companies, and exemptions for research and development. Five months later, all are part of what Dewhurst said adds up to about $1.5 billion in tax cuts passed by the Senate this week.